Mr. J enjoys goods x and y according to the utility function U(x,y)=3x2y The price of good

Mr. J enjoys goods x and y according to the utility function U(x,y)=3x2y The price of good

Oct 14th, 2014

SoccerBoss

Category:

Economics

Price: $5 USD

Question description

Mr. J enjoys goods x and y according to the utility function
U(x,y)=3x2y
The price of good x is $4, the price of good y is $4, and he has $120 to spend.
(1) Write and draw Mr. J’s budget line.
(2) Write the budget exhaustion condition of Mr. J’s optimization problem.
(3) Write the rationality condition of Mr. J’s optimization problem.
(4) Given the two conditions from (2) and (3), calculate the optimal bundle (x*, y*) that Mr. J will choose in order to maximize his utility.
(5) Qualitatively indicate the above optimal bundle in a graph (You don’t need to be very accurate).